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Section 1: 10-Q (10-Q)

felp-10q_20180630.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission File Number: 001-36503

 

Foresight Energy LP

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

80-0778894

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

211 North Broadway, Suite 2600, Saint Louis, MO

 

63102

(Address of principal executive offices)

 

(Zip code)

Registrant’s telephone number, including area code: (314) 932-6160

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer           Non-accelerated filer  

  

Smaller reporting company        

 

 

 

 

 

 

 

 

 (do not check if a smaller reporting company)

  

Emerging growth company  

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No    

As of August 1, 2018, the registrant had 80,595,620 common units and 64,954,691 subordinated units outstanding.

 

 

 

 


 

 

 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

Item 1.Financial Statements

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets

3

Unaudited Condensed Consolidated Statements of Operations

4

Unaudited Condensed Consolidated Statement of Partners’ Capital

5

Unaudited Condensed Consolidated Statements of Cash Flows

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.Controls and Procedures

32

PART II

 

OTHER INFORMATION

 

Item 1.Legal Proceedings

33

Item 1A.Risk Factors

33

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3.Defaults Upon Senior Securities

33

Item 4.Mine Safety Disclosures

33

Item 5.Other Information

33

Item 6. Exhibits

34

Signatures

35

 

 

2


PART I – FINANCIAL INFORMATION.

 

Item 1. Financial Statements.

 

Foresight Energy LP

Unaudited Condensed Consolidated Balance Sheets

(In Thousands)

 

 

(Successor)

 

 

 

(Successor)

 

 

June 30,

 

 

 

December 31,

 

 

2018

 

 

 

2017

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

38,760

 

 

 

$

2,179

 

Accounts receivable

 

27,242

 

 

 

 

35,158

 

Due from affiliates

 

49,908

 

 

 

 

37,685

 

Financing receivables - affiliate

 

3,262

 

 

 

 

3,138

 

Inventories, net

 

44,678

 

 

 

 

40,539

 

Prepaid royalties

 

 

 

 

 

4,000

 

Deferred longwall costs

 

20,427

 

 

 

 

9,520

 

Other prepaid expenses and current assets

 

7,243

 

 

 

 

10,844

 

Contract-based intangibles

 

1,867

 

 

 

 

11,268

 

Total current assets

 

193,387

 

 

 

 

154,331

 

Property, plant, equipment and development, net

 

2,203,885

 

 

 

 

2,378,605

 

Due from affiliates

 

 

 

 

 

947

 

Financing receivables - affiliate

 

62,434

 

 

 

 

64,097

 

Prepaid royalties, net

 

2,096

 

 

 

 

1,250

 

Other assets

 

4,087

 

 

 

 

5,358

 

Contract-based intangibles

 

1,389

 

 

 

 

2,052

 

Total assets

$

2,467,278

 

 

 

$

2,606,640

 

Liabilities and partners’ capital

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt and capital lease obligations

$

50,449

 

 

 

$

109,532

 

Current portion of sale-leaseback financing arrangements

 

4,907

 

 

 

 

4,148

 

Accrued interest

 

24,258

 

 

 

 

13,410

 

Accounts payable

 

88,081

 

 

 

 

76,658

 

Accrued expenses and other current liabilities

 

65,575

 

 

 

 

62,442

 

Asset retirement obligations

 

4,416

 

 

 

 

4,416

 

Due to affiliates

 

24,909

 

 

 

 

13,324

 

Contract-based intangibles

 

20,275

 

 

 

 

28,688

 

Total current liabilities

 

282,870

 

 

 

 

312,618

 

Long-term debt and capital lease obligations

 

1,221,776

 

 

 

 

1,205,000

 

Sale-leaseback financing arrangements

 

194,118

 

 

 

 

196,496

 

Asset retirement obligations

 

51,583

 

 

 

 

39,655

 

Other long-term liabilities

 

29,383

 

 

 

 

32,330

 

Contract-based intangibles

 

71,220

 

 

 

 

144,715

 

Total liabilities

 

1,850,950

 

 

 

 

1,930,814

 

Limited partners' capital:

 

 

 

 

 

 

 

 

Common unitholders (79,921 and 77,644 units outstanding as of June 30, 2018 and December 31, 2017, respectively)

 

388,575

 

 

 

 

421,161

 

Subordinated unitholder (64,955 units outstanding as of June 30, 2018 and December 31, 2017)

 

227,753

 

 

 

 

254,665

 

Total partners' capital

 

616,328

 

 

 

 

675,826

 

Total liabilities and partners' capital

$

2,467,278

 

 

 

$

2,606,640

 

 

See accompanying notes.

3


 

Foresight Energy LP

Unaudited Condensed Consolidated Statements of Operations

(In Thousands, Except per Unit Data)

 

 

(Successor)

 

 

(Successor)

 

 

 

(Successor)

 

 

(Successor)

 

 

(Predecessor)

 

 

Three Months Ended

June 30, 2018

 

 

Three Months Ended

June 30, 2017

 

 

 

Six Months Ended

June 30, 2018

 

 

Period From

April 1, 2017 through

June 30, 2017

 

 

Period From

January 1, 2017

through

March 31, 2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal sales

$

269,992

 

 

$

204,516

 

 

 

$

508,379

 

 

$

204,516

 

 

$

227,813

 

Other revenues

 

1,430

 

 

 

2,577

 

 

 

 

3,769

 

 

 

2,577

 

 

 

2,581

 

Total revenues

 

271,422

 

 

 

207,093

 

 

 

 

512,148

 

 

 

207,093

 

 

 

230,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of coal produced (excluding depreciation, depletion and amortization)

 

136,982

 

 

 

105,790

 

 

 

 

257,552

 

 

 

105,790

 

 

 

117,762

 

Cost of coal purchased

 

3,906

 

 

 

 

 

 

 

5,657

 

 

 

 

 

 

7,973

 

Transportation

 

59,034

 

 

 

28,258

 

 

 

 

105,477

 

 

 

28,258

 

 

 

37,726

 

Depreciation, depletion and amortization

 

55,312

 

 

 

49,537

 

 

 

 

106,732

 

 

 

49,537

 

 

 

39,298

 

Contract amortization and write-off

 

(70,424

)

 

 

8,733

 

 

 

 

(71,844

)

 

 

8,733

 

 

 

 

Accretion on asset retirement obligations

 

559

 

 

 

728

 

 

 

 

1,290

 

 

 

728

 

 

 

710

 

Selling, general and administrative

 

10,534

 

 

 

7,277

 

 

 

 

18,309

 

 

 

7,277

 

 

 

6,554

 

Long-lived asset impairments

 

110,689

 

 

 

 

 

 

 

110,689

 

 

 

 

 

 

 

Loss on commodity derivative contracts

 

 

 

 

1,117

 

 

 

 

 

 

 

1,117

 

 

 

1,492

 

Other operating (income) expense, net

 

(42,983

)

 

 

(13,490

)

 

 

 

(43,631

)

 

 

(13,490

)

 

 

451

 

Operating income

 

7,813

 

 

 

19,143

 

 

 

 

21,917

 

 

 

19,143

 

 

 

18,428

 

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

37,035

 

 

 

35,420

 

 

 

 

72,708

 

 

 

35,420

 

 

 

43,380

 

Change in fair value of warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,278

)

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

95,510

 

Net loss

$

(29,222

)

 

$

(16,277

)

 

 

$

(50,791

)

 

$

(16,277

)

 

$

(111,184

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss available to limited partner units - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common unitholders

$

(14,090

)

 

$

(8,790

)

 

 

$

(23,879

)

 

$

(8,790

)

 

$

(56,259

)

Subordinated unitholder

$

(15,132

)

 

$

(7,487

)

 

 

$

(26,912

)

 

$

(7,487

)

 

$

(54,925

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per limited partner unit - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common unitholders

$

(0.18

)

 

$

(0.12

)

 

 

$

(0.30

)

 

$

(0.12

)

 

$

(0.85

)

Subordinated unitholder

$

(0.23

)

 

$

(0.12

)

 

 

$

(0.41

)

 

$

(0.12

)

 

$

(0.85

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units outstanding - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units

 

79,842

 

 

 

76,270

 

 

 

 

79,347

 

 

 

76,270

 

 

 

66,533

 

Subordinated units

 

64,955

 

 

 

64,955

 

 

 

 

64,955

 

 

 

64,955

 

 

 

64,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared per limited partner unit

$

0.0565

 

 

$

 

 

 

$

0.1130

 

 

$

 

 

$

 

 

See accompanying notes.

 

4


Foresight Energy LP

Unaudited Condensed Consolidated Statement of Partners’ Capital

(In Thousands, Except Unit Data)

 

 

Limited Partners

 

 

 

 

 

 

Common

 

 

Number of

 

 

Subordinated

 

 

Number of

 

 

Total Partners'

 

 

Unitholders

 

 

Common Units

 

 

Unitholder

 

 

Subordinated Units

 

 

Capital

 

Successor balance at January 1, 2018

$

421,161

 

 

 

77,644,489

 

 

$

254,665

 

 

 

64,954,691

 

 

$

675,826

 

Net loss attributable to successor

 

(23,879

)

 

 

 

 

 

(26,912

)

 

 

 

 

 

(50,791

)

Cash distributions

 

(9,020

)

 

 

 

 

 

 

 

 

 

 

 

(9,020

)

Conversion of warrants, net

 

 

 

 

2,230,020

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

352

 

 

 

 

 

 

 

 

 

 

 

 

352

 

Issuance of equity-based awards

 

 

 

 

46,556

 

 

 

 

 

 

 

 

 

 

Distribution equivalent rights on LTIP awards

 

(39

)

 

 

 

 

 

 

 

 

 

 

 

(39

)

Successor balance at June 30, 2018

$

388,575

 

 

 

79,921,065

 

 

$

227,753

 

 

 

64,954,691

 

 

$

616,328

 

 

See accompanying notes.

 

5


Foresight Energy LP

Unaudited Condensed Consolidated Statements of Cash Flows

(In Thousands)

 

(Successor)

 

 

(Successor)

 

 

(Predecessor)

 

 

Six Months Ended

June 30, 2018

 

 

Period From

April 1, 2017

through

June 30, 2017

 

 

Period From

January 1, 2017

through

March 31, 2017

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(50,791

)

 

$

(16,277

)

 

$

(111,184

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

106,732

 

 

 

49,537

 

 

 

39,298

 

Amortization of debt discount and deferred issuance costs

 

1,326

 

 

 

628

 

 

 

6,365

 

Contract amortization and write-off

 

(71,844

)

 

 

8,733

 

 

 

 

Equity-based compensation

 

352

 

 

 

211

 

 

 

318

 

Loss on commodity derivative contracts

 

 

 

 

1,117

 

 

 

1,492

 

Settlements of commodity derivative contracts

 

 

 

 

444

 

 

 

3,724

 

Realized gains on coal derivatives included in investing activities

 

 

 

 

 

 

 

(3,520

)

Long-lived asset impairments

 

110,689

 

 

 

 

 

 

 

Insurance proceeds included in investing activities

 

(42,947

)

 

 

 

 

 

 

Change in fair value of warrants

 

 

 

 

 

 

 

(9,278

)

Debt extinguishment expense

 

 

 

 

 

 

 

95,510

 

Other

 

 

 

 

5,867

 

 

 

1,321

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

7,916

 

 

 

1,836

 

 

 

19,695

 

Due from/to affiliates, net

 

309

 

 

 

(4,204

)

 

 

(13,157

)

Inventories

 

(3,327

)

 

 

(19,863

)

 

 

(917

)

Prepaid expenses and other assets

 

(5,050

)

 

 

(2,224

)

 

 

(5,117

)

Prepaid royalties

 

3,154

 

 

 

4,276

 

 

 

(241

)

Commodity derivative assets and liabilities

 

 

 

 

(303

)

 

 

(532

)

Accounts payable

 

11,423

 

 

 

4,075

 

 

 

7,324

 

Accrued interest

 

10,848

 

 

 

11,801

 

 

 

(9,803

)

Accrued expenses and other current liabilities

 

2,007

 

 

 

423

 

 

 

(3,430

)

Other

 

1,491

 

 

 

(965

)

 

 

1,782

 

Net cash provided by operating activities

 

82,288

 

 

 

45,112

 

 

 

19,650

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

Investment in property, plant, equipment and development

 

(32,228

)

 

 

(21,732

)

 

 

(19,908

)

Return of investment on financing arrangements with Murray Energy (affiliate)

 

1,539

 

 

 

719

 

 

 

705

 

Insurance proceeds

 

42,947

 

 

 

 

 

 

 

Settlement of certain coal derivatives

 

 

 

 

 

 

 

3,520

 

Proceeds from sale of property, plant and equipment

 

 

 

 

 

 

 

1,898

 

Net cash provided by (used in) investing activities

 

12,258

 

 

 

(21,013

)

 

 

(13,785

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

Borrowings under revolving credit facility

 

50,000

 

 

 

 

 

 

 

Payments on revolving credit facility

 

(15,000

)

 

 

 

 

 

(352,500

)

Net change in borrowings under A/R securitization program

 

 

 

 

(100

)

 

 

7,000

 

Proceeds from long-term debt and capital lease obligations

 

 

 

 

 

 

 

1,234,438

 

Payments on long-term debt and capital lease obligations

 

(78,633

)

 

 

(12,287

)

 

 

(970,721

)

Payments on short-term debt

 

(3,654

)

 

 

 

 

 

 

Proceeds from issuance of common units to Murray Energy (affiliate)

 

 

 

 

 

 

 

60,586

 

Distributions paid

 

(9,020

)

 

 

 

 

 

 

Debt extinguishment costs

 

 

 

 

 

 

 

(57,645

)

Debt issuance costs paid

 

 

 

 

 

 

 

(27,328

)

Other

 

(1,658

)

 

 

(2,130

)

 

 

(1,892

)

Net cash used in financing activities

 

(57,965

)

 

 

(14,517

)

 

 

(108,062

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

36,581

 

 

 

9,582

 

 

 

(102,197

)

Cash, cash equivalents, and restricted cash, beginning of period

 

2,179

 

 

 

14,724

 

 

 

116,921

 

Cash, cash equivalents, and restricted cash, end of period

$

38,760

 

 

$

24,306

 

 

$

14,724

 

 

See accompanying notes.

6


Foresight Energy LP

Notes to Unaudited Condensed Consolidated Financial Statements

 

1. Organization, Nature of Business and Basis of Presentation

 

Foresight Energy LLC (“FELLC”), a perpetual-term Delaware limited liability company, was formed in September 2006 for the development, mining, transportation and sale of coal. Prior to June 23, 2014, Foresight Reserves LP (“Foresight Reserves”) owned 99.333% of FELLC and a member of FELLC’s management owned 0.667%. On June 23, 2014, in connection with the initial public offering (“IPO”) of Foresight Energy LP (“FELP”), Foresight Reserves and a member of management contributed their ownership interests in FELLC to FELP for which they were issued common and subordinated units in FELP. Because this transaction was between entities under common control, the contributed assets and liabilities of FELLC were recorded in the combined consolidated financial statements of FELP at FELLC’s historical cost. FELP has been managed by Foresight Energy GP LLC (“FEGP”) subsequent to the IPO.

 

On April 16, 2015, Murray Energy Corporation and its affiliates (“Murray Energy”) and Foresight Reserves completed a transaction whereby Murray Energy acquired a 34% voting interest in FEGP and all of the outstanding subordinated units of FELP, representing a 50% ownership of the Partnership’s limited partner units outstanding at that time. On March 28, 2017, following the completion of a debt refinancing (the “March 2017 Refinancing Transactions”), Murray Energy exercised its option (the “FEGP Option”) to acquire an additional 46% voting interest in FEGP from Foresight Reserves and a former member of management pursuant to the terms of an option agreement, dated April 16, 2015, among Murray Energy, Foresight Reserves and a former member of management, as amended, thereby increasing Murray Energy’s voting interest in FEGP to 80%. The aggregate exercise price of the FEGP Option was $15 million. Murray Energy’s acquisition of the incremental ownership in FEGP resulted in its obtaining control of FELP. Per Accounting Standards Codification (“ASC”) 805-50-25-4, Murray Energy, as the acquirer of FELP through FEGP, has the option to apply pushdown accounting in the separate financial statements of the acquiree. Murray Energy elected to adopt pushdown accounting in our stand alone financial statements and therefore we have reflected the adjustment of our assets and liabilities to fair value required by pushdown accounting in our consolidated financial statements.

 

Due to the application of pushdown accounting, our condensed consolidated financial statements and certain footnote disclosures are presented in two distinct periods to indicate the application of two different bases of accounting between the periods presented. The periods prior to the acquisition date are identified as “Predecessor” and the periods after the acquisition date are identified as “Successor”. For accounting purposes, management has designated the acquisition date as March 31, 2017 (the “Acquisition Date”), as the operating results and change in financial position for the intervening period was not material.

 

As used hereafter in this report, the terms “Foresight Energy LP,” “FELP,” the “Partnership,” “we,” “us” or like terms, refer to the consolidated results of Foresight Energy LP and its consolidated subsidiaries and affiliates, unless the context otherwise requires or where otherwise indicated.

 

The Partnership operates in a single reportable segment and currently owns four underground mining complexes in the Illinois Basin: Williamson Energy, LLC (“Williamson”); Sugar Camp Energy, LLC (“Sugar Camp”); Hillsboro Energy, LLC (“Hillsboro”); and Macoupin Energy, LLC (“Macoupin”). Mining operations at our Hillsboro complex have been idled since March 2015 due to a combustion event. On April 11, 2018, we announced that our Hillsboro operation will be permanently closed (see Note 13). Our mined coal is sold to a diverse customer base, including electric utility and industrial companies primarily in the eastern United States and overseas markets.

The accompanying condensed consolidated financial statements contain all significant adjustments (consisting of normal recurring accruals) that, in the opinion of management, are necessary to present fairly, the Partnership’s condensed consolidated financial position, results of operations and cash flows for all periods presented. In preparing the condensed consolidated financial statements, management used estimates and assumptions that may affect reported amounts and disclosures. To the extent there are material differences between the estimates and actual results, the impact to the Partnership’s financial condition or results of operations could be material. The unaudited condensed consolidated financial statements do not include footnotes and certain financial information as required annually under U.S. generally accepted accounting principles (“U.S. GAAP”) and, therefore, should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2017 included in our Annual Report on Form 10-K filed with the SEC on March 7, 2018. The results of operations for interim periods are not necessarily indicative of results that can be expected for any future period, including the year ending December 31, 2018. Intercompany transactions are eliminated in consolidation.

 

7


2. New Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. We adopted ASC 606 as of January 1, 2018 using the modified retrospective approach; therefore, the comparative information has not been adjusted and continues to be reported under previous revenue recognition guidance.  The adoption did not have a material effect on our financial position and results of operations as the timing of revenue recognition related to coal sales remains consistent between ASC 606 and previous revenue recognition guidance. Additionally, there was no cumulative adjustment to partners’ capital as of January 1, 2018. Refer to Note 3 for the additional financial statement disclosures required by ASC 606.

In November 2016, the FASB issued ASU 2016-18, which clarified the presentation requirements of restricted cash within the statement of cash flows. Under ASU 2016-18, the changes in restricted cash and restricted cash equivalents during the period should be included in the beginning and ending cash and cash equivalents balance reconciliation on the statement of cash flows. When cash, cash equivalents, restricted cash or restricted cash equivalents are presented in more than one line item within the statement of financial position, an entity shall calculate a total cash amount in a narrative or tabular format that agrees to the amount shown on the statement of cash flows. Details on the nature and amounts of restricted cash should also be disclosed. This standard is effective for fiscal years beginning after December 15, 2017, and is to be applied retrospectively. We adopted this update during the first quarter of 2018 and this new guidance to required adjustments to the presentation of our condensed consolidated statement of cash flows. Refer to Note 4 for the additional financial statement disclosures required by this update.

In February 2016, the FASB issued ASU 2016-02, which updated guidance regarding the accounting for leases. This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier application permitted. This update will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the effect of this update on our consolidated financial statements and related disclosures. We disclosed our future minimum payments on our contractual royalty obligations and operating lease obligations in our Annual Report on Form 10-K filed with the SEC on March 7, 2018 and we will evaluate those contracts as well as other existing arrangements to determine if they qualify for lease accounting under the new standard. 

 

3. Revenue from Contracts with Customers

 

Significant Accounting Policy

 

Revenue is measured based on consideration specified in a contract with a customer. The Partnership recognizes revenue when it satisfies a performance obligation by transferring control over goods and services to a customer.

 

Shipping and handling costs (e.g., the application of anti-freezing agents) are accounted for as fulfillment costs. The Partnership includes any fulfillment costs billed to customers in revenue, with the corresponding expenses included in cost of coal produced and transportation.

 

Nature of Goods and Services

 

The Partnership’s primary source of revenue is from the sale of coal to domestic and international customers through short-term and long-term coal sales contracts. Coal sales revenue includes the sale to customers of coal produced and, from time to time, the re-sale of coal purchased from third-parties or from one of our affiliates. Performance obligations, consisting of individual tons of coal, are satisfied at a point in time when control is transferred to a customer.  For domestic coal sales, this generally occurs when coal is loaded onto railcars at the mine or onto barges at terminals.  For coal sales to international markets, this generally occurs when coal is loaded onto an ocean vessel.  

 

The Partnership’s coal sales contracts typically range in length from one to three years, however some agreements have terms of as little as one month. Coal sales contracts generally provide for either a fixed base price or a base price determined by a market index. The base price is subject to quality and weight adjustments. Quality and weight adjustments are recorded as necessary based on coal sales contract specifications as a reduction or increase to coal sales revenue. The coal sales contracts also may give the customer the

8


option to vary volumes, subject to certain minimums. Coal sales are generally invoiced upon shipment and payment is due from customers within standard industry credit timeframes.  

 

Disaggregation of Revenue

The following table disaggregates revenue by domestic and international markets:

 

 

(Successor)

 

 

(Successor)

 

 

Three Months Ended

June 30, 2018

 

 

Six Months Ended

June 30, 2018

 

 

(In Thousands)

 

 

(In Thousands)

 

Coal sales - Domestic

$

146,682

 

 

$

289,397

 

Coal sales - International

 

123,310

 

 

 

218,982

 

Total coal sales

$

269,992

 

 

$

508,379

 

 

Contract Balances

 

The following table provides information about balances associated with contracts with customers:

 

 

(Successor)

 

 

 

 

June 30,

2018

 

 

 

 

(In Thousands)

 

 

 

Receivables - Included in 'Accounts receivable'

$

23,559

 

 

 

Receivables - Included in 'Due from affiliates - current'

 

43,681

 

 

 

Total contract balances

$

67,240

 

 

 

 

Contract Costs

 

The Partnership applies the practical expedient in ASC 340-40-25-4, whereby the Partnership recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Partnership would have recognized is one year or less. These costs are included in selling, general and administrative expenses.

 

Other Revenues

 

Other revenues consist primarily of a transport lease and overriding royalty agreements with Murray Energy (see Note 9). These arrangements are accounted for under guidance contained in ASC 310 Receivables, ASC 360 Property, Plant, and Equipment, and ASC 840 Leases and therefore are outside the scope of ASC 606.

 

 

 


9


4. Supplemental Cash Flow Information

 

The following is supplemental information to the condensed consolidated statement of cash flows (in thousands):

 

 

(Successor)

 

 

(Successor)

 

 

(Predecessor)

 

 

Six Months Ended

June 30, 2018

 

 

Period From

April 1, 2017

through

June 30, 2017

 

 

Period From

January 1, 2017

through

March 31, 2017

 

Supplemental disclosures of non-cash financing activities:

 

 

 

 

 

 

 

 

 

 

 

Short-term insurance financing

$

985

 

 

$

2,188

 

 

$

 

Reclassification of warrant liability to partners' capital

$

 

 

$

 

 

$

41,888

 

 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown in the condensed consolidated statement of cash flows (in thousands):

 

 

(Successor)

 

 

(Successor)

 

 

(Successor)

 

 

(Successor)

 

 

 

(Predecessor)

 

 

June 30,

2018

 

 

December 31,

2017

 

 

June 30,

2017

 

 

March 31,

2017

 

 

 

December 31,

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

38,760

 

 

$

2,179

 

 

$

7,208

 

 

$

4,235

 

 

 

$

103,690

 

Restricted cash - Included in 'Other prepaid expenses and current assets'

 

 

 

 

 

 

 

17,098

 

 

 

10,489

 

 

 

 

10,731

 

Restricted cash - Included in 'Other assets'

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,500

 

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

$

38,760

 

 

$

2,179

 

 

$

24,306

 

 

$

14,724

 

 

 

$

116,921

 

 

Restricted cash included in other prepaid expenses and current assets were amounts that were required to be temporarily held in a restricted cash account for a short duration related to our trade accounts receivable securitization program. The accounts receivable securitization program terminated in December 2017.  

 

Restricted cash included in other assets was cash collateral used to secure a letter of credit for one of our surety bond providers. During the three months ended March 31, 2017, the restriction was released.

 

5. Accounts Receivable

 

Accounts receivable consist of the following:

 

 

(Successor)

 

 

 

(Successor)

 

 

June 30,

2018

 

 

 

December 31,

2017

 

 

(In Thousands)

 

Trade accounts receivable

$

23,559

 

 

 

$

31,225

 

Other receivables

 

3,683

 

 

 

 

3,933

 

Total accounts receivable

$

27,242

 

 

 

$

35,158

 

 

 

 

 

 


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6. Inventories, Net

Inventories, net consist of the following:

 

 

 

(Successor)

 

 

 

(Successor)

 

 

June 30,

2018

 

 

 

December 31,

2017

 

 

(In Thousands)

 

Parts and supplies

$

17,501

 

 

 

$

17,196

 

Raw coal

 

10,796

 

 

 

 

5,577

 

Clean coal

 

16,381

 

 

 

 

17,766

 

Total inventories

$

44,678

 

 

 

$

40,539

 

 

 

 

7. Property, Plant, Equipment and Development, Net

Property, plant, equipment and development, net consist of the following:

 

 

(Successor)

 

 

 

(Successor)

 

 

June 30,

2018

 

 

 

December 31,

2017

 

 

(In Thousands)

 

Land, land rights and mineral rights

$

1,631,504

 

 

 

$

1,639,980

 

Machinery and equipment

 

558,200

 

 

 

 

580,649

 

Machinery and equipment under capital lease

 

127,064